The Treasury Department on Wednesday said it will buy back up to $6 billion of government debt in an operation aimed at keeping bond markets functioning.
The much-anticipated announcement triples the normal buyback operation and follows a statement Aug. 19 from Treasury Secretary Scott Bessent that the department would at least double the normal amount for already-issued securities.
Treasury also said future operations will be at least $4 billion.
Though the operation ostensibly is aimed at keeping government debt markets liquid — in this case for 10- and 20-year notes — the extraordinary measure also has been seen as an effort to put a lid on Treasury yields, which had hit highs not seen since prior to the global financial crisis in 2008.
Market reaction, however, was negative. Treasury yields rose further but were volatile with long-dated securities increasing as much as 5 basis points each before easing.
The benchmark 10-year issue hit 4.841% around 11:30 a.m. ET. The 20-year climbed to 5.314% while the 30-year bond rose 5 basis points to also punch through what had been seen as the important 5.3% level, most recently yielding 5.307%. One basis point equals 0.01%.
“Hank Paulson’s bazooka this is not,” said bond fund manager Mark Spindel, chief investment officer at Potomac River Capital, referring to the former Treasury secretary’s actions during the financial crisis. “And it took an act of Congress in that crisis.”
There had been speculation heading into Wednesday’s announcement that the buyback level could be many times the initial release, in which Treasury said the amount will “at least” double the normal $2 billion operation.
“At the end of the day, the Treasury is issuing a spectacular amount of securities, and they’re trying to control the price level at the back end of the curve with really what, in the big scheme of things, is not necessarily a major operation,” said Robert Tipp, chief investment strategist and head of global bonds at PGIM Credit.
“When they came out and said we would be buying at least 4 billion, I think market expectations were kind of thinking six to 10, and they’ve come in at the bottom end of the market’s expectations,” he added. “As a result, you’re seeing a negative reaction here in the market with the sell-off at the back end of the curve.”
The actual buybacks will happen Thursday in a 20-minute operation that will conclude at 2 p.m. ET.
Higher Treasury yields have come against a confluence of factors: surging government debt that recently passed $40 trillion, elevated inflation fears from tariffs and the Iran war, and a corresponding resurgence in energy prices that saw crude oil top $100 a barrel Wednesday.
At the same time, the long end of the Treasury curve is the less active part of a market that is considered the deepest and most liquid in the world.
Treasury issuance this year has jumped 11.8% from 2025, and the $31.8 trillion in publicly held debt is up 8.2%.
“Treasury announced buybacks less than hoped for (or feared depending on your point of view),” Mizuho economist Alex Pelle wrote. “The risk is that the Treasury ratchets this up in some manner given the market’s reaction. However, I think the pressure to go against standard operating procedure will abate somewhat on the other side of the midterms.”
The accelerated buybacks have faced critics, with some questioning what impact the amount would have on such a massive market, as well as the action being a break from Treasury moving in a predictable manner on the process.
One prominent critic was Stanley Druckenmiller, head of Duquesne Family Office and a former mentor to Bessent.
“Once markets believe Treasury is defending a price, every rise in yields becomes a test of official resolve, and the operations must grow to survive the tests,” Druckenmiller wrote in a Wall Street Journal op-ed.
“Governments defending prices against fundamentals always lose. The only variable is how much they spend before conceding,” he added.
Treasury’s maneuvering, which also has included a parallel move to support the Japanese yen, come as Federal Reserve Chairman Kevin Warsh has preached less involvement in financial markets. The Fed has a rate decision coming in a week, with traders pricing in a hike.
“Actions not words are what matter, and action in this case mean changes in the direction of fiscal policy or interest rates,” said Anil Kashyap, a University of Chicago economist.
— CNBC’s Steve Liesman contributed.
Correction: Anil Kashyap is a University of Chicago economist. An earlier version misspelled his name.
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